Household Staff: Payroll, Schedule H, and Written Agreements

A housekeeper who arrives each morning, follows your instructions, and works with your equipment is, on the reasoning of the IRS’s own example, your household employee. That makes you an employer, with a payroll, a filing calendar, and wage rules to observe, whether or not anyone has mentioned it.

If your husband ran the household payroll, or long-serving staff have always been paid informally, now is the moment to put the arrangement on a proper footing. This guide will let you decide who is your employee, which 2026 thresholds apply, what you file and when, where state law asks more, how to hire, and what a written agreement should settle.

Whether the person in your house is your employee

IRS Publication 926 for 2026 frames the test around control: you have a household employee if you hired someone to do household work and can control not only what is done but how it is done. The Schedule H instructions add that the right to control is what counts, even if you allow freedom of action. Full or part time, hourly or by the job, found directly or from an agency’s list: none of it changes the answer.

The IRS’s examples include housekeepers, cooks, drivers, nannies, caretakers, health aides, private nurses, and yard workers. Suppose instead a landscaping firm sends its own crew with its own tools and directs their work: they are not your employees, and nor is a worker supplied by an agency that controls what is done and how. Independent trades call for the discipline in Repairs and Contractors: A Predictable Target. Publication 926 also places a private secretary, tutor, or librarian outside household work, so those roles need separate advice.

The 2026 federal thresholds

Two numbers switch the federal obligations on.

The first is $3,000. Pay any one household employee $3,000 or more in cash wages in 2026 (it was $2,800 for 2025) and Social Security and Medicare taxes apply to all of that employee’s cash wages for the year: 7.65 percent from each side, made up of 6.2 percent for Social Security on wages up to $184,500 and 1.45 percent for Medicare, without a cap. You may withhold the employee’s share or pay it yourself, in which case it counts as extra wages for income tax. On wages above $200,000, you also withhold a 0.9 percent Additional Medicare Tax from the employee.

The second is $1,000 in a quarter. If total cash wages to household employees reach $1,000 in any calendar quarter of 2025 or 2026, you owe federal unemployment (FUTA) tax of 6 percent on the first $7,000 paid to each employee in 2026, from your own funds. A credit of up to 5.4 percent for state contributions can bring the net rate to 0.6 percent, though the credit is reduced for wages paid in a state the Department of Labor designates a credit reduction state, and the full credit requires your 2026 state contributions to be paid by April 15, 2027.

Food and lodging you provide are not cash wages for Social Security and Medicare. Federal income tax is withheld only if the employee asks, supplies Form W-4, and you agree. Wages paid to your spouse, your child under 21, your parent, or a worker under 18 follow separate rules.

Schedule H, Form W-2, and the filing calendar

You need an employer identification number; your Social Security number will not serve. For 2026 wages, give Form W-2 to each employee with $3,000 or more in Social Security and Medicare wages, or from whom you withheld income tax, and file Copy A with Form W-3 at the Social Security Administration, both by February 1, 2027. The taxes are reported on Schedule H with your 2026 Form 1040 and paid by April 15, 2027; an extension of time to file your return also applies to Schedule H, but it extends only the filing, not the payment.

Paying only then may bring an underpayment penalty, so the IRS suggests raising withholding, including on a pension, or enlarging estimated payments, due for 2026 on April 15, June 15, and September 15, 2026, and January 15, 2027. Estimated Tax After a Spouse Dies explains the safe harbors.

The One Big Beautiful Bill Act lets workers deduct up to $12,500 ($25,000 on a joint return, reduced at higher incomes) of qualified overtime for tax years 2025 through 2028, meaning the premium portion of overtime the Fair Labor Standards Act requires, and employers must report it to them. Keep employment tax records for at least four years after the return’s due date or the payment date, whichever is later.

Wages, overtime, and the live-in exception

The Fair Labor Standards Act covers domestic service workers whose cash pay meets the Social Security threshold for the year ($3,000 in 2026) or who work more than eight hours in total in any workweek. The federal minimum wage is $7.25 an hour, and the Department of Labor advises household employers to follow whichever federal, state, or local law protects the employee most. Covered, nonexempt employees earn at least time and a half for hours over 40 in a week.

A domestic worker who lives in your home and is employed by you, as an individual or household, is exempt from federal overtime but not from the minimum wage for every hour worked. Live-in means living, working, and sleeping on the premises seven days a week, five days a week (120 hours or more), or five consecutive days or nights. You may agree to exclude sleep, meals, and genuinely free time from hours worked; interruptions by a call to duty still count, and if actual hours depart significantly from the agreement, a new one should reflect them. Keep a copy of it and a record of the exact hours.

A narrower exemption, from both minimum wage and overtime, covers companionship for an older person or one with an illness, injury, or disability, with personal care capped at 20 percent of weekly hours and no medically related services. Have counsel confirm the role fits before relying on it. For all covered staff, keep records of weekly hours, cash wages, board or lodging credits, and overtime for three years.

Where state law asks more

Federal rules are a floor. New York’s domestic workers’ bill of rights provides overtime after 40 hours a week, or 44 for live-in workers, a 24-hour day of rest every seven days, and three paid days of rest a year after a year with the same employer. Hawaii has required minimum wage and overtime after 40 hours for domestic workers, live-in staff included, with limited exceptions, since July 1, 2013. California requires overtime for personal attendants after nine hours in a day or 45 in a week. In such states the federal live-in exemption settles little. If staff travel with you to a second home, ask counsel which state’s rules govern that time.

Publication 926 also directs you to your state unemployment tax agency, and to establish whether other state employment taxes apply and whether you must carry workers’ compensation. Insuring a High-Value Household sets out how to put that last question to your broker.

Form I-9, identity, and background checks

Knowingly hiring, or continuing to employ, someone not authorized to work in the United States is unlawful. For a household employee hired to work regularly, the employee completes a section of Form I-9 by the first day of work, and you complete yours, after examining the documents presented, within three business days of the first day of paid work. Keep the form, which is not filed with USCIS, for three years after hire or one year after employment ends, whichever is later. Casual domestic work on a sporadic, irregular, or intermittent basis is outside the requirement. Ask for the Social Security number no later than the first payday, and record it and the name exactly as they appear on the card.

If you buy a background report from a screening company, the Fair Credit Reporting Act, as the FTC explains it, requires a stand-alone written notice and the candidate’s written permission first. Before rejecting someone because of the report, give them a copy and a summary of their rights; afterwards, name the reporting company and explain the right to dispute. Some states and cities add limits. Staff who will hold keys and alarm codes belong in the review in Household Security After a Change in Occupancy.

Agency, payroll service, or direct hire

The tax answer follows control, not the name on the invoice. If an agency provides the worker and controls what is done and how, the worker is not your employee; if a placement agency merely introduces a candidate whom you then hire and direct, the worker is.

A payroll service can calculate, file, and deposit for you, but Publication 926 is plain that you remain responsible if it fails.

A payroll service can carry the paperwork; it cannot carry the responsibility.

Ask for copies of every filing and payment confirmation, and reconcile them each quarter. Otherwise the choice is practical: an employing agency takes payroll off your desk at the cost of choosing less directly who comes; a direct hire offers continuity and discretion.

What the written agreement should settle

For live-in staff, you must keep a copy of the hours agreement, so it belongs in writing. For others, it is a recommendation rather than a federal rule, and a sound one; confirm whether your state or city asks for written terms. The Department of Labor’s Women’s Bureau publishes sample agreements for nannies, house cleaners, and home care workers, noting that they are not required by law and cannot waive legal rights.

The samples address duties, schedule and on-call time, cancellations, pay and overtime rates, payday and pay statements, taxes and agreed deductions, living arrangements, leave, health and safety including workers’ compensation, and notice and severance. They also commit the employer not to retain the employee’s passport or other original documents. To these, add a confidentiality clause covering your affairs, your guests, and your address.

Checklist before the first payday

1. For each person who works in the house, decide whether you control what is done and how, and record the conclusion.
2. Obtain an employer identification number.
3. Have the employee complete Section 1 of Form I-9 by the first day of work, and complete Section 2 within three business days of the first day of paid work.
4. Register with your state unemployment tax agency and settle workers’ compensation.
5. Confirm federal, state, and local minimum wage and overtime rules, including any domestic workers’ bill of rights.
6. For live-in staff, sign an hours agreement and record exact hours.
7. Before any background check, give the stand-alone notice and obtain written permission.
8. Diary the dates: estimated payments during the year, Forms W-2 by February 1, 2027, and Schedule H by April 15, 2027.
9. Sign a written agreement, and review it each year and whenever duties change.

This article provides general U.S. educational information and is not legal, tax, payroll, immigration, or insurance advice. Confirm current federal and state rules with the agencies and with a qualified professional who knows your household.